Markets Week Ahead: US Dollar, Gold, Crude Oil, AUD/USD, USD/CAD, RBA, BoC
The US Dollar broadly underperformed against its major counterparts this past week, with gold prices seeing a strong rally. A root cause of this was somewhat disappointing economic data from the world’s largest economy. That contributed to financial markets increasingly pricing in a less dovish Federal Reserve down the road.
This pushed down Treasury yields, allowing anti-fiat gold to outperform. A key winner in the currency space was the sentiment-linked Australian and New Zealand Dollars. Gains in Wall Street, such as the Dow Jones and S&P 500, allowed the risk-sensitive currencies to outperform while demand faltered for the safe-haven US Dollar.
Meanwhile, crude oil prices rallied. At +7.5%, WTI rallied the most last week since late March. This meant another up month in August, setting the stage for a 4th consecutive monthly winning streak for the commodity. This is even despite deteriorating economic conditions in China, which is a key importer of commodities.
Taking a look at the week ahead, the Australian Dollar will be awaiting the RBA rate decision and local GDP data. The Canadian Dollar is also eyeing an interest rate decision from the BoC. Meanwhile, US ISM data will cross the wires and China will release its latest inflation rate. What else is in store for financial markets in the week ahead?
How Markets Performed – Week of 8/28
The latest US Jobs Report nudged the US dollar against a range of G7, while updated ONS data shows the UK economy in better fettle than previously thought.
The Australian Dollar held firm against crosswinds that are bruising sentiment and against a US Dollar that is looking for its own identity as uncertainty for the Fed’s rate path unfolds.
The yen remains vulnerable as BoJ and Government officials dismiss policy changes and FX intervention threats. US and UK rates, yields near peaks but carry trade remains.
The Dollar Index (DXY) roared back to life to end the week on a high. Softening labor market data suggests the Fed may be done but DXY bulls remain undeterred. Where to Next?
Gold and silver prices could rise in the coming days if interest rate expectations shift in a more dovish direction on bets that current economic conditions will lead the Fed to be more cautious.
--- Article Body Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
--- Individual Articles Composed by DailyFX Team Members
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